Costco vs. Home Depot: A Contrast in Retail Performance
Costco Wholesale (NASDAQ: COST) is forecasted to achieve $270 billion in net sales for fiscal 2025, marking it as a leading entity in the general merchandise retail sector. Over the past five years, Costco’s shares have delivered a total return of 199% as of February 13.
In contrast, Home Depot (NYSE: HD) has seen its share price rise by only 41% in the same period, though it remains a dominant force in the extensive home improvement market.
Considering where to invest $1,000 today? Our analysts suggest the 10 best stocks to buy right now. Click for more details.
When comparing these two retail giants, which one presents a better investment opportunity at this time? This question is vital for investors considering retail stocks.
Costco has consistently reported same-store sales growth, even during economic downturns like those experienced during the COVID-19 pandemic, where it recorded a 7.7% increase in same-store sales. This stability provides reassurance to investors.
The strength of Costco lies in its ability to offer high-quality products at competitive prices due to its scale and buying power. This model fosters customer loyalty. Additionally, its membership approach leads to repeat business, with its member base growing by 5.2% annually to 81.4 million and a renewal rate of 89.7%, creating a steady revenue stream.
Costco currently operates 921 warehouses, with plans to open 30 new locations each year, showing significant growth potential both domestically and internationally.
On the other hand, Home Depot experienced impressive sales growth during the pandemic, yet it has faced declining demand lately, primarily due to economic factors affecting consumer behavior. Only a 0.2% growth in same-store sales was recorded in the third quarter of fiscal 2025, indicating challenges in attracting customers for larger purchases.
Despite the recent struggles, Home Depot remains the leader in a massive $1 trillion industry, benefiting from strong brand recognition and a vast network of physical stores. Furthermore, the need for home upkeep will only increase as the average U.S. home ages, which may support long-term demand.
While Costco is typically regarded as the higher-quality business, its current high price-to-earnings (P/E) ratio of 54.6 may deter value investors. In contrast, Home Depot, with a P/E of 26.8, offers a potentially better bargain, although it also faces operational difficulties.
Before investing in Costco, be aware that the Motley Fool Stock Advisor team has identified what they believe to be the 10 best stocks to buy now, which do not include Costco.
